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Health IT Needs Creative Economists

Health care providers are not paid for how healthy they make their patients, but by how many they care for. Since many physicians feel health IT cuts into their time to visit patients, they are understandably resistant to using it.

The solution to health IT problems is not in silicon but in accounting ledgers.

The CEO of Wellpoint Health Networks Inc., Leonard Schaeffer, recently described his companys attempt to give away $42 million in hardware, software and support. To many physicians, he said, free was simply not cheap enough. Just under three in four took the free equipment offered, but only about one in ten accepted an e-prescribing PDA, a technology considered to be one of the first and easiest steps to use of a robust EHR (electronic health record.)

Its no wonder that WellPoint, the nations second largest health insurer, was giving away equipment, as many feel that insurance companies and health care payers reap the bulk of the savings from health IT. Nonetheless, it is the health care providers that are typically the ones asked to pay for installation and maintenance of health information technology.

Health care providers are not paid for how healthy they make their patients, but by how many they care for. Since many physicians feel health information technology cuts into their time to visit patients, they are understandably resistant to using it. A recent report from the Markle Foundation estimates that the financial incentive necessary to get physicians to adopt interoperable EHR could be as high as $24,000 per physician per year; exactly where the money would come from is still unclear.

Part of the reason is that the actual payment structures to compensate health care providers range from counterproductive to incomprehensible.

One scheme is to pay providers per procedure, which creates incentives for doctors to bring patients in for more procedures. This is called "churn," and some evidence shows that system was abused earlier in the century, says Russ Cucina, a clinician and professor at University of California, San Francisco.

The solution offered by the insurance companies to discourage churn is also flawed. Managed care providers in the 1990s created a system in which physician offices were paid by the number of patients assigned to them, whether the patients visited the office or not. That meant doctors were losing money whenever they saw patients, and that physician offices, not insurance companies, took on financial risk if a patient got very sick.

The current compensation system is a hodgepodge of the two, says Cucina. And it means that EHR could be financially good or bad for a practice, depending on how the incentives are aligned.

A much-talked about but still unimplemented alternative is a pay-for-performance solution. In this scenario, health IT would be crucial to measuring and sustaining progress and doctors would be paid more if patients conditions are managed well. That does create a counterincentive to pick the easiest patients to take care of, admits Cucina, but he believes the risk is mitigated because its usually the patients that pick their physicians, not the other way around.

John Quinn, CTO of Capgeminis provider health practice sees another problem. "How do you institute a pay-for-performance program thats budget neutral?" he asks. The only way to do so would require cutting pay for some physicians, a prospect that is certainly likely to fuel some resistance.

Thus, the biggest problems in health information technology have less to do with hardware and software than with economics and policy. But the solution is also much grander. It requires creating a health care system that serves everyones best interest.

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